Commonwealth Bank has led a rapid series of moves by Australia’s biggest banks to support customers as strict measures to contain the delta outbreak threaten to derail the economic recovery.
Within 24 hours of the dramatic escalation of Sydney’s lockdown, banks had detailed measures including free overdrafts for small businesses, targeted home loan deferrals and had extended a promise not to evict customers from their homes.
Commonwealth Bank CEO Matt Comyn said the number of customers calling its support lines doubled on Saturday in response to the snap lockdown of the discretionary retail and construction industries and three local government areas in Sydney’s south-west.
“Most of the people ringing in were wanting to know what their options are, particularly if things were to go beyond a couple of weeks,” Mr Comyn said.
With the potential for lockdowns and limitations on business to be extended given the severity of the delta strain and low level of vaccinations, CBA has extended a pledge it made at the height of the pandemic last year not to evict customers from their homes to the end of summer 2022.
CBA will email customers in the Fairfield, Liverpool and Canterbury-Bankstown local government areas, along with customers working in the construction and retail sectors, on Monday to brief them on relief available.
This will include freezing home loans repayments for two months. Other banks are also willing to defer repayments for affected customers who reach out for help.
The construction industry employs around 250,000 people in Sydney, around 10 per cent of the labour force, and CBA reckons around 150,000 businesses are involved in the sector, which will be shuttered from Monday despite staying open during the pandemic last year.
Panicked subcontractors and tradies were among 500 CBA customers who called its helpline on Saturday, double the normal number.
“There is a lot of concern and uncertainty, so we want to give people confidence and provide assurances there is support available to help get them through the next couple of months,” Mr Comyn said.
Other banks are also extending relief. Westpac said from Monday it would offer eligible existing small business customers interest-free, temporary overdrafts up to $15,000, as businesses around the country, including in the retail sectors, worry about the impact of restricted trading hours on cash flow.
“We know that the current lockdowns mean some of our small business customers may need urgent access to cash,” Westpac CEO Peter King said.
National Australia Bank and CBA have also offered to run staff vaccination programs in their premises, operated by the same services that deliver regular staff flu jabs.
“We need to get people vaccinated as quickly as possible and when people get the opportunity, they should take it,” NAB CEO Ross McEwan said. “It is the only way I can see to getting back to normal freedoms.”
NAB said calls to its assistance lines rose by 10 per cent towards the end of last week and the bank was expecting numbers to increase this week.
“With the longer period of lockdown in Sydney we expect that number to go up – but by what we don’t know,” Mr McEwan said.
Mr Comyn briefed Australian Prudential Regulation Authority chairman Wayne Byres on Saturday, after the NSW government’s restrictions in response to COVID-19 cases circulating in the community remaining stubbornly high.
Last year, APRA provided banks with capital relief on deferred loans. But given the shorter duration of new proposed deferrals and the sector’s strong capital levels, the plan at this stage is for deferred loans to be treated as being in arrears for capital purposes.
“It would be premature to seek that capital relief and we have the financial capability to support customers during this time,” Mr Comyn said.
Mr McEwan agreed. “With the volumes we are seeing coming in, we don’t need help at this point in time. We are carrying excessive levels of capital than what we would normally hold, and we will probably hold on to a higher level of capital given the uncertainty of COVID over the next year or two,” he said.
The flurry of activity on the weekend came as AFR Weekend foreshadowed intervention to support customers. Despite the sector’s efforts, Mr Comyn said he was not expecting anything like the levels of demand for loan deferrals as last year, when across the sector almost $270 billion of loans were put on hold.
“But just knowing what options are available to them helps customers a lot,” Mr Comyn said. “It is as much as about projecting confidence and assurance, so customers know we are here to help them through the period.”
Banks will also ensure that any customers who seek deferrals for the latest lockdowns do not have their credit scores penalised, which could lift the cost of credit in the future.
Banks remain confident that if the Melbourne and Sydney lockdowns are short and the virus can be contained, the economy will roar back to life when restrictions are eased.
NAB is holding its prediction for 5 per cent GDP growth this year. Mr McEwan said: “While we are seeing the economy stalling at the moment, we saw economies bounce back very quickly when things opened up again. And we expect the economy to bounce back again.
Jabs at work
“It is a move we have had to take to stem the flow of this variant, which is rapidly moving around the community. I can see the rationale behind that. The harsher the close down, the faster we can come out of it, if everybody does what they are asked to do.”
Mr Comyn said “like everyone, we are hopeful the lockdowns are effective, and the case numbers come down substantially in greater Sydney and Melbourne in the next few days”.
Both NAB and CBA said they would be keen on offering staff COVID-19 vaccinations in their offices, and could extend this to staff families too. The provider of CBA flu jabs is already delivering COVID-19 vaccines to nursing homes, while NAB is encouraging its flu provider to get accredited to give COVID-19 jabs.
“We are looking to them to work with the government to see if they will do COVID vaccines in our work building,” Mr McEwan said.
“They will need approvals and they will need the vaccine – but we are there to help support the health group we use when it can get approval.”
Mr Comyn said banks and other companies, by providing vaccine services, could help to take the burden off the healthcare sector and help accelerate vaccination rates.
“There is substantial supply becoming available in the coming months, and we are willing to help in any way we can to support that distribution.”